23andMe Board Walkout: What’s Behind the Sudden Departure?

Amid a plummeting stock price and growing privacy concerns, all seven independent board members of 23andMe resigned in protest. And Big Pharma's involved?

In a dramatic turn of events, all seven independent board members of genetic testing giant 23andMe resigned following a contentious disagreement over CEO Anne Wojcicki’s plan to take the company private. The resignation highlights deeper issues within the company, from stock price collapse to privacy concerns, and raises questions about 23andMe's future direction. This departure marks a pivotal moment for the company, once hailed as a biotech innovator.

Background on 23andMe and Board Resignation:

Founded in 2006, 23andMe pioneered direct-to-consumer genetic testing, offering individuals insights into their ancestry and potential health risks. Over the years, the company expanded its mission, venturing into therapeutics and drug discovery. However, the company's journey has not been smooth. Since going public through a merger with Richard Branson's VG Acquisition, 23andMe’s stock plummeted by a staggering 96.6%, leaving investors questioning the company’s future.

The Resignation Announcement:

In September 2024, the independent board members resigned after months of unsuccessful negotiations with Wojcicki regarding her proposal to take the company private. The resigning directors cited a lack of transparency and an underdeveloped proposal that didn’t serve the interests of non-affiliated shareholders. In their resignation letter, the board expressed frustration over the absence of a fully financed and actionable proposal.

Wojcicki's Privatization Plan:

CEO Anne Wojcicki responded to the board's resignation with a statement expressing surprise and disappointment, reiterating her commitment to 23andMe’s mission and long-term success. 

She proposed to acquire all outstanding shares not owned by her or her affiliates for $0.40 per share—a move seen as controversial given the company’s recent stock performance. Wojcicki maintains that privatizing the company would help it escape the short-term pressures of public markets, allowing for a focus on long-term goals and innovation. Despite this, her plan has been met with skepticism from both the board and investors.

Private vs Public: Why go back to Private Ownership?

There are several reasons a company may choose to go from being public to private. These include:

1. Reduced Regulatory Scrutiny: Public companies are subject to intense regulatory oversight from institutions like the SEC. They must regularly file financial reports and disclose detailed information to shareholders. Going private eliminates many of these burdens, allowing the company to operate with more discretion.

2. Short-Term Market Pressures: Public companies often face pressure from shareholders and analysts to deliver consistent short-term results, which can distract from long-term goals. By going private, companies can focus on long-term strategies without worrying about quarterly earnings and stock price fluctuations.

3. Cost Savings: Maintaining a public company is expensive, with costs related to regulatory compliance, reporting, auditing, and investor relations. By going private, companies can reduce these costs.

4. Greater Control: When public, companies are owned by shareholders who can influence decision-making through voting power. By going private, the company’s management or founders can regain control, allowing for more freedom in making strategic decisions.

5. Undervaluation in Public Markets: Sometimes, companies believe they are undervalued by the market and that their stock price doesn’t reflect the true worth of the business. In such cases, they may prefer to go private, giving them time to restructure or grow without the pressure of being undervalued.

6. Strategic Changes: If a company is planning significant strategic changes—such as restructuring, mergers, or divestitures—doing so out of the public eye can make it easier to implement. Private companies don't have to deal with stock price reactions or investor pushback during such transitions.

7. Long-Term Focus: By going private, management can concentrate on building the company over the long term, which may involve risky ventures that could negatively impact stock prices in the short run but are essential for growth.

So, for 23andme, which would it be?

Based on Wojcicki’s words in her statement, taking 23andMe private would help the company escape "the short term pressures of the public markets" and focus on long-term success. 

She also stated that going private would help them be “better positioned to achieve our mission and goals.” 

So what is their mission? What are their goals?

In 2021, When Wojcicki rang the bell to the Nasdaq exchange (marking their first day as a public company), she stated:

“23andMe is more than just a genetics company.

We are an activist brand that is approaching health care and drug discovery with the individual at the center, as our partner.

We are going to continue pioneering a consumer-centered personalized health care world. We are going to show that drug discovery can be more efficient when you start with a human genetic insight.”

This was echoed in her letter addressing the resignations, where she says they will remain committed to the company's mission of transforming healthcare through genetic information.

Wait, what?

Oh, you didn’t know? Let me explain:

BIG PHARMA has entered the Chat

23andMe has been expanding beyond its initial focus on consumer genetic testing into the fields of therapeutic development and healthcare technologies. Some key areas include:

Drug Discovery and Development:

23andMe has leveraged its massive genetic database to enter the drug discovery space. By analyzing genetic data from millions of customers, the company can identify genetic variants linked to diseases and use these insights to discover new drug targets.

In 2018, 23andMe entered a significant partnership with GlaxoSmithKline (GSK) [Read about them here] to collaborate on drug development. This partnership allowed 23andMe to combine its genetic insights with GSK’s resources in developing new therapies. One of the leading drug candidates emerging from this collaboration is aimed at treating inflammatory diseases, specifically targeting the CD96 protein, which plays a role in immune responses.

Personalized Medicine:

23andMe's genetic testing services provide consumers with insights into their predisposition to certain health conditions, such as Type 2 diabetes, Parkinson’s disease, and certain cancers. The long-term vision is that this genetic information could help guide personalized treatment plans (read “Drugs”) based on an individual’s unique genetic profile. 

3. Therapeutic Development Based on Genetic Insights:

In 2020, 23andMe began developing its own in-house therapeutics. This initiative utilizes the company's extensive genetic database, which contains millions of genotyped individuals, to find genetic markers linked to diseases and develop treatments for them. The goal is to create therapies that target the root genetic causes of diseases, offering more effective treatments.

How does one eradicate a disease that is linked to a gene? 

Easy. 

You change the genes.

4. Carrier Status and Genetic Health Risks:

23andMe also provides reports on genetic health risks and carrier status for inherited conditions. For example, customers can learn whether they carry variants associated with conditions like cystic fibrosis, sickle cell anemia, or hereditary cancers (like BRCA1 and BRCA2 mutations). While this service is more consumer-oriented, it can indirectly affect healthcare by encouraging early detection and preventive care (again “Drugs”).

But hey! If you’re predisposed, we can fix your genes now!

6. Collaborations in Therapeutics and Data Licensing:

23andMe has partnered with other pharmaceutical companies and academic institutions to license its genetic data for research. These collaborations aim to accelerate the discovery of new treatments and therapies for various conditions, leveraging the rich genetic data collected by 23andMe.

Genetic data licensing?? Who did they license to?

• GlaxoSmithKline (started in 2018)

• Almirall, a global pharmaceutical company specializing in dermatology. (starting in 2020)

• Pfizer (started in 2015)

• Genentech (part of Roche) (started in 2014)

Pharmaceutical companies are, at their core, profit-driven entities. While drug discovery and development can lead to life-saving treatments, these companies have a history of prioritizing profits over accessibility and affordability. 

For instance, newly developed drugs are often priced exorbitantly, making them inaccessible to those who need them most. The fact that 23andMe is licensing genetic data to such companies means that personal DNA data could be contributing to the development of expensive drugs that many individuals can’t afford. 

And, if history is any indicator, “expensive drugs” is the least of our worries.

There’s also the risk of genetic data being used for discriminatory purposes, either by insurance companies, employers, or other organizations. If pharmaceutical companies gain access to large datasets of genetic information (through maybe a Data Leak?), there’s potential for misuse in ways that could lead to discrimination based on someone’s genetic predisposition to diseases.

The lack of transparency in these partnerships raises red flags. Many consumers are unaware that their genetic data is being licensed or sold to pharmaceutical companies. Even when they are informed, the terms are often vague, and the long-term consequences of sharing such data are difficult to foresee. Consumers may feel betrayed if they realize that the personal information they entrusted to a genetic testing company is being used to fuel Big Pharma’s profit machine.